ASML: Raising 2026 Guidance on Surging AI-Driven Lithography Demand Across Memory and Logic
Q1 2026 Earnings Call, April 15, 2026
ASML delivered strong first quarter results and substantially upgraded its full-year 2026 revenue guidance, driven by unprecedented customer demand for advanced lithography capacity across both Memory and Logic segments. The company now expects 2026 revenue between EUR 36 billion and EUR 40 billion, up from its prior outlook, while maintaining gross margin guidance of 51% to 53%. Management cited AI-related infrastructure investment as the primary catalyst behind customer capacity expansion plans that extend well into 2027.
Revenue Guidance Raised on Broad-Based Strength
ASML reported first quarter net sales of EUR 8.8 billion, in line with guidance, with net system sales of EUR 6.3 billion split nearly evenly between Logic at 49% and Memory at 51%. The company delivered over EUR 4.1 billion in EUV system sales, including two High NA systems, alongside EUR 2.1 billion in non-EUV sales. Installed Base Management revenue came in slightly above guidance at EUR 2.5 billion.
The updated 2026 guidance represents a meaningful increase in expectations, particularly for immersion deep UV systems. CFO Roger Dassen explained that after previously doubting whether immersion could match 2025 levels, the company has "been working extremely hard" and now believes immersion output can approach last year's performance. Critically, this increase comes almost entirely from non-China customers, with China remaining at roughly 20% of total revenue at the midpoint. Dassen noted, "What has changed here is, as we mentioned last quarter, we were looking at immersion and said, given the supply chain situation in immersion, we said we doubt whether we can get immersion to the level that we had last year."
The guidance also reflects increased EUV expectations and stronger Installed Base Management revenue driven by service contracts for the expanding EUV installed base and customer demand for productivity upgrades. Management emphasized that the guidance range accommodates potential outcomes from ongoing export control discussions.
Memory Customers Sold Out Through Year-End
CEO Christophe Fouquet described an unprecedented demand environment in Memory, stating that "many customers have commented that they are sold out for the remainder of the year and that they expect the supply limitation to persist beyond 2026, despite their plans to add significant capacity." This supply constraint is driving aggressive capital expenditure increases supported by long-term agreements between Memory manufacturers and their own customers.
The DRAM story has proven particularly favorable for ASML's litho intensity. Fouquet explained that major EUV adoption occurred in DRAM during 2025, including from the company's U.S. DRAM customer, driven by both performance benefits and capacity considerations. "If you are going to use more EUV layers, you are going to need less multi-patterning and multi-patterning takes a lot of space also in the fab," Fouquet noted. This adoption of Low NA EUV creates a clear pathway for future High NA adoption using the same logic of single exposure and process simplification.
Logic Capacity Constraints Driving Multi-Node Expansion
On the Logic side, customers are adding capacity across multiple advanced nodes while ramping 2-nanometer production for next-generation HPC and mobile applications. ASML expects supply limitations to persist across advanced Logic nodes beyond 2026 as customers respond to AI-driven demand. Management confirmed that the bandwidth in the 2026 guidance accommodates various scenarios for additional foundry capacity from Samsung and Intel, though the U.S. player already possesses substantial capacity and is not expected to contribute significantly this year.
Dassen noted that demand in the foundry business "is huge and is outweighing the supply," creating opportunities for players beyond the market leader. Samsung's plans in Taylor are materializing with corresponding ASML shipments already occurring. When asked about market structure, Dassen suggested that "having 3 players in there will probably guarantee even more innovation," though he acknowledged the market leader has been "tremendously innovative" even in a concentrated environment.
Capacity Expansion Plans Accelerating to Meet 2027 Demand
Perhaps most significantly, ASML disclosed plans to increase Low NA EUV capacity to "at least 80 systems" in 2027, up from approximately 60 systems in 2026 and 44 systems in 2025. This represents more than doubling total EUV capacity shipped to customers in roughly two years. Fouquet emphasized the company is "quarter-by-quarter increasing the move rates" and scaling deep UV and application products in alignment.
The "at least 80" qualifier reflects ongoing discussions with customers about their needs. Dassen explained that 80 tools at higher productivity levels would provide double the wafer-per-hour capacity compared to 2025 shipments. He stressed, "You have the unit numbers that everyone is very much focused on, but then you should also look at the progress that we're making in terms of productivity."
Productivity Roadmap Provides Multiple Capacity Levers
Beyond unit volume, ASML presented an updated Low NA EUV product roadmap showing improved short-term and long-term productivity targets. The company demonstrated a 1,000 watt source and now targets at least 330 wafers per hour on Low NA EUV by the start of the next decade. In the near term, all NXE:3800E systems can benefit from an upgrade providing 10 additional wafers per hour, bringing throughput to 230 wafers per hour, available immediately via software switch and qualification in most cases.
For the NXE:3800F system, ASML raised the wafer-per-hour specification from 250 to 260. The company plans to start shipping the F model in 2027 with full volume in 2028. Management expects 2027 shipments to consist primarily of E models at the higher 230 wafer-per-hour throughput, with F models comprising a minority. Dassen confirmed that average selling prices will improve in 2027 due to the more favorable mix with no D models and the introduction of higher-priced F models.
Fouquet emphasized that capacity is "a lot more than one pony trick," noting that customers are "extremely happy" with productivity upgrades because "this allow them to get capacity right away" rather than waiting for new system deliveries. The strength in Installed Base Management sales reflects this dynamic, with upgrades often requiring only software changes and qualification.
High NA Progress Accelerating Toward Production
On High NA development, ASML reported that the platform has now processed over 0.5 million wafers and achieved over 80% availability. Customer presentations at the SPIE Advanced Lithography and Patterning Conference demonstrated use cases in both Logic and DRAM where a single High NA exposure can replace complex multi-patterning processes requiring three or four Low NA exposures. For some critical layers, High NA can reduce total process steps by a factor of 10.
Progress with resist technology now allows ASML to target line pitches of 18 nanometers for Logic and contact pitches below 28 nanometers for DRAM, meaning High NA can support single exposure for at least three nodes in both Logic and DRAM. Fouquet noted that several customers are moving to test High NA on real product wafers, with "the threshold to start using High NA on existing product" particularly low for DRAM.
When asked whether tight capacity could accelerate High NA adoption since it saves Low NA capacity, Fouquet acknowledged the possibility but cautioned it remains "a bit too early to respond to the question by the affirmative today." However, he did not exclude the scenario, noting it depends on the combination of continuing strong capacity requirements and High NA maturity progress over the coming months.
Gross Margin Dynamics Reflect Mix and Investment
First quarter gross margin came in at the high end of guidance at 53%, primarily due to very high-margin components within the Installed Base business, particularly software-based upgrades. For the second quarter, ASML guided to 51% to 52% gross margin, narrowing from the typical range, as the company does not expect the same concentration of high-margin upgrades and is incurring costs associated with hiring and training personnel for the capacity ramp.
Dassen explained that "every ramp, you always have a little bit of cost before you have the benefit of that," which offsets the gross margin benefit from increased immersion volume. For the full year, the company maintained its 51% to 53% gross margin guidance, with the benefit of higher volumes and better mix more evident in the second half as the headcount ramp matures.
Management defended its pricing model against suggestions that tight customer capacity constraints create opportunities for premium pricing. Dassen stated firmly, "In our model of pricing, as you know, our model of pricing is not based on the squeeze that our customers find ourselves in. That's not the way we do business." Instead, ASML prices based on the value provided generation-over-generation and takes its "fair share" of that value, applying the model consistently across Memory and Logic customers.
Supply Chain and Manufacturing Execution on Track
Fouquet provided confidence that ASML's supply chain can support the aggressive ramp, noting that years of preparation to reach 90 Low NA systems and 600 total deep UV systems are "paying off." He specifically called out ZEISS and optics as areas where the company faced "major challenges a few years ago in the previous ramps" but is now "in a much better shape."
The CEO highlighted multiple execution improvements including maturity gains on the 3800E tool that enable shorter cycle times in the factory, expanded physical capacity for building tools, and the ability to add necessary personnel. Fouquet emphasized, "We do not want EUV to be the bottleneck" and assured investors that "we have many, many different ways to drive capacity up" including manufacturing volume, cycle time, productivity improvements, and footprint expansion as needed.
Management confirmed it has secured long lead-time items and recently obtained land to enable future expansion, providing "many degrees of freedom" for flexibility. Dassen added, "We have worked on that extremely hard in this region to get that accomplished, and we were recently able to get that done."
Clean Room Constraints Easing as Customer Commitment Strengthens
When questioned about customer clean room constraints potentially limiting ASML's ability to ship, Fouquet acknowledged that customer fab space was "one of the factor, if not the key factor on what we could do this year" when demand surged rapidly. However, the raised 2026 guidance indicates progress on this front, with plans "really solidifying, getting more and more clarity about the number of pedestal that will be available when."
For 2027, Fouquet noted dramatically reduced customer hesitation about accelerating capital expenditures, citing strong financial performance at DRAM customers and capacity constraints at Logic customers. "There is no hesitation whatsoever in the mind of our customer at this point of time, not only to invest also because sometimes they even get guarantee from their own customer on the investment, but also as a result to move as quickly as possible," he stated. The dynamic has shifted to "the more, the faster, the better."
Long-Term Market View Under Revision
ASML indicated that AI developments have materially changed the trajectory from numbers presented at the November 2024 Capital Markets Day, where the company projected 160,000 wafer start per month capacity additions annually in DRAM and 200,000 in advanced Logic from 2025 to 2030. Fouquet acknowledged, "We will all agree that things have changed a bit with AI in the last couple of years," noting the biggest change appears to be in DRAM where added capacity per year is "most probably above the number we have discussed" at least for 2026.
Management plans to provide updated long-term market views at the 2027 Capital Markets Day, asking for time to "really digest everything that is happening and try to translate that into a bit of a long-term view of the market." Fouquet noted the dramatic shift in tone from just two quarters ago when "we were having a bit of a different discussion on the market."
Export Control Uncertainty Embedded in Guidance
ASML confirmed that its 2026 guidance range accommodates potential outcomes from ongoing export control discussions, though management provided no additional detail on this front. With China remaining at approximately 20% of revenue at the midpoint and the guidance increase coming primarily from non-China customers, the company appears to have built in flexibility for various regulatory scenarios.
The second quarter guidance calls for total net sales between EUR 8.4 billion and EUR 9 billion with Installed Base Management sales around EUR 2.5 billion and gross margin of 51% to 52%. R&D expenses are expected at approximately EUR 1.2 billion with SG&A around EUR 0.3 billion, consistent with first quarter levels. The company ended the quarter with EUR 8.4 billion in cash and short-term investments after negative EUR 2.6 billion free cash flow driven by the timing of down payments. ASML purchased EUR 1.1 billion in shares during the quarter and proposed a final 2025 dividend of EUR 2.70 per share, bringing the total 2025 dividend to EUR 7.50, a 17% increase over 2024.
ASML Deep Dive
The Monopoly of Precision
ASML occupies a position in the global semiconductor hierarchy that is virtually unprecedented in industrial history. By controlling the supply of extreme ultraviolet lithography systems, the company has effectively become the final arbiter of Moore’s Law. This is not merely a matter of technological lead but a fundamental bottleneck in the digital economy. The firm’s architecture of the supply chain—an intricate network of specialized sub-suppliers coupled with its own proprietary optical and source technologies—creates a moat that is reinforced by the sheer impossibility of replicating its R&D spend and institutional memory. While other semiconductor equipment manufacturers compete on throughput or surface engineering, ASML competes on the physics of the nanometer scale.
The transition toward High-NA EUV represents a critical juncture for the firm. As the industry moves to sub-two-nanometer nodes, the technical complexity of patterning shifts from managing traditional light paths to navigating the extreme stochastic challenges of high-energy photon interaction. ASML’s success in commercializing High-NA systems validates its strategy of vertical integration and long-term co-development with key foundry partners. However, this level of dependency is a double-edged sword. ASML is tethered to the capital intensity of the logic and foundry sector, leaving it exposed to the cyclicality of wafer fab equipment spending and the strategic shifts of its primary clients as they balance capacity expansion against yield optimization.
Industry Structure and Competitive Dynamics
The lithography market remains a study in lopsided competition. In the domain of immersion deep ultraviolet and extreme ultraviolet systems, ASML faces no credible challenge from Canon or Nikon, its historic peers. While Canon has attempted to push nanoimprint lithography as an alternative to expensive EUV scanners, the technology remains relegated to niche applications, primarily in memory, and lacks the throughput scalability required for the leading-edge foundry logic processes that drive the industry's profitability. Canon’s efforts represent a clever tactical pivot, yet they do not threaten the foundational hegemony ASML maintains over the roadmap of the major global foundries.
Conversely, the equipment landscape outside of lithography—in deposition, etch, and metrology—is characterized by the fierce rivalry between Applied Materials, Lam Research, and Tokyo Electron. These firms are critical to the ASML ecosystem, as the success of EUV lithography is entirely contingent on the subsequent process steps they enable. A risk to ASML is not that a direct competitor will replace its scanners, but that architectural shifts in chip design—such as the transition to back-side power delivery or the increasing reliance on advanced packaging like chiplets—might change the relative importance of lithography versus deposition and etch. If the industry finds ways to achieve performance gains through superior interconnects rather than shrinking the gate, the incremental value proposition of the next generation of EUV scanners could potentially face scrutiny.
Management Execution and Strategic Risks
Management’s track record over the past twenty-four months has been marked by a masterful, albeit strained, navigation of geopolitical constraints and supply chain volatility. The firm has successfully managed the rollout of High-NA EUV despite the intense pressure of export controls that have bifurcated the global semiconductor equipment market. By maintaining a disciplined R&D focus while simultaneously expanding its manufacturing footprint, leadership has ensured that it stays ahead of the logic nodes, which is the company’s only viable strategic path. However, the reliance on a single geographic market for significant portions of its DUV revenue, while simultaneously being restricted from selling its most advanced tools to that same market, creates a persistent tension in the operating model.
Execution risk, however, is not merely internal. It lies in the integration complexity for the clients. As foundries move to High-NA, they are encountering significant yield and cost challenges that are entirely new. If ASML’s clients struggle to achieve the anticipated economic return on their investment in these massive capital machines, the pace of future orders may moderate. Management must effectively act as an extension of their customers' process engineering teams to ensure that these machines perform not just in the lab, but at high-volume manufacturing yields. Any failure here would not be a failure of the tool itself, but a failure of the partnership model that has been the bedrock of ASML’s dominance.
Emerging Threats and Technological Shifts
The primary threat to the long-term narrative is not a direct challenger to lithography, but a structural change in the semiconductor stack. As the cost per wafer continues to balloon, there is an industry-wide mandate to find cost-efficient alternatives to aggressive scaling. If, for instance, advancements in materials science or heterogeneous integration allow foundries to achieve high-performance logic with older, depreciated DUV equipment, the urgency to upgrade to the most advanced EUV platforms will diminish. This shift would fundamentally alter the growth trajectory of the company, moving it from a high-growth scaling enabler to a steady-state provider of legacy maintenance and incremental upgrades.
Furthermore, the emergence of disruptive patterning techniques, such as directed self-assembly or advanced multi-patterning refinements in etch-deposition, suggests that the industry is exploring every avenue to delay the necessity of further lithographic complexity. While none of these technologies are currently capable of usurping EUV, they represent a persistent intellectual and engineering effort to circumvent the cost structures that ASML mandates. The company is not oblivious to this, hence its focus on optimizing throughput in its existing scanner fleet, yet the potential for the semiconductor industry to favor 'good enough' scaling over absolute, extreme-cost scaling remains a non-zero risk to the multi-year bull case.
The Scorecard
ASML remains the most critical node in the global technology infrastructure, maintaining a technical lead that effectively precludes competition in the high-end lithography segment. Its control over the roadmap of the semiconductor industry provides a rare level of visibility into future demand, provided the logic foundries maintain their commitment to node-to-node scaling. The successful deployment of High-NA systems and the ability to maintain a coherent global strategy amidst tightening geopolitical restrictions demonstrate a level of operational resilience that is unmatched by peers in the capital equipment space. The business is built on a foundation of intellectual property that would take decades and tens of billions in capital for any entrant to even approach.
Despite these strengths, the company is not immune to the cooling of the semiconductor investment cycle or the potential for industry-wide shifts in scaling priorities. The primary risk remains the sustainability of the current pricing power as customers grapple with the prohibitive costs of leading-edge production and look to alternative architectural efficiencies. While the competitive threat from traditional rivals is negligible, the threat from structural shifts in how chips are designed—prioritizing integration over raw lithographic shrinkage—is the quiet variable that could influence the long-term terminal growth rate. ASML is an essential, high-moat enterprise, yet it is a hostage to the very industry it enables, making its long-term health entirely dependent on the willingness of its largest clients to continue spending heavily into the next generation of nanometer nodes.